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Have you ever received a credit memo in Canada? Wondering why you got it? If you’ve ever returned a product after purchase, you may receive a credit memo instead of the money you were expecting to get refunded back. This might be a little confusing at first but don’t worry, because credit memos are common in Canada. 

What Is A Credit Memo In Canada?

A credit memo is a type of document that a merchant will issue to you (the buyer) that lowers how much money you owe them. Instead of receiving a refund, you may get a credit memo when making a return. You can use the credit memo to cover the cost (partially or fully) of your next purchase with their business.

Essentially, a credit memo is a kind of store credit. Once a return is made, a credit memo will be applied to both the buyers and sellers on their bank statements. While you may not receive credit memos from every Canadian retailer, they’re quite common among small and local businesses. On the other hand, big chain stores will usually issue direct refunds.

Can I Recieve A Credit Memo From A Bank?

Occasionally businesses may also receive credit memos, except they may be from financial institutions. These credit memos are often called bank credit memos. They’re statements that notify depositors about increases in their account balances for transactions, such as refunds of previous bank charges. Credit memos can also be used to account for promotional discounts or billing errors.        

What Is Included On A Credit Memo In Canada?

Generally, a credit memo will feature an explanation of the transaction, along with a reference number. This is so merchants can keep track of their inventory and buyers can understand what the credit is for. Credit memos also include information like: 

  • Payment terms
  • Shipping address
  • Customer bank account number
  • Billing method
  • Item description
  • Total price
  • Number of items purchased
  • Purchase date
  • Purchase order number (PO)   

When Do You Get A Credit Memo In Canada?

Although credit memos most commonly appear on bank statements after a return is finalized, there are other occasions when buyers will receive them, including when:

  • A product is defective or arrives damaged
  • The merchant makes a clerical error
  • A customer makes an overpayment 

If you’re a business owner, you may also receive a credit memo when:

  • Your bank collects a note for your business
  • Your bank issues a refund for a prior charge on your account
  • Interest has been added to the balance of your savings account

Why Did I Get A Credit Memo From The CRA?

There are scenarios where Canada Revenue Agency will send you a credit memo, like: 

  • When you overpay taxes
  • When your financial situation changes (unemployment benefits, tax refunds, etc.)
  • During certain cases of bankruptcy or insolvency

Some provinces also provide additional credits or rebates. For example, qualifying for the Ontario Trillium Benefit (OTB) may cause the CRA to send you a credit memo.

Is It Possible To Receive A “Credit Memo Canada” On Student Loans?

In cases of overpayment or if you’ve applied for federal or provincial grants, you may receive a credit memo on your bank statement. You can receive a credit memo on student loans by contacting the ESDC. The amount you qualify for depends on your loan repayment and any interest that’s applied.    

What Should You Do With A Credit Memo?

Most of the time, a credit memo must be used at the business that issued it. However, if you receive a credit memo from another entity, like the CRA, there are many things you can do with it. For instance, if you’re paying for your education using student loans or personal loans, you should use your credit memo to pay off any debt you accumulate. 

Otherwise, you can use the money from a credit memo to offset the cost of your next purchase at the same merchant. The amount owed to you gets used up first and if you buy something more expensive than that amount, you’ll only have to pay the difference.   

What’s The Difference Between A Credit Memo And A Refund?

Even though they sound similar at first, credit memos and refunds are actually different:

  • Credit Memo – A credit memo basically gives you a store credit toward your next purchase from the same merchant that issued it. Small and local businesses will often do this instead of giving out direct refunds. Whatever funds you receive from the credit memo cannot be used at any other location or redeemed for cash.   
  • Refund – Refunds are common for larger businesses with strict policies. In this case, the merchant deducts the amount you paid for a returned item from your refund amount. The money will then be sent to your bank account or credit card, and you can use it for anything you want, including purchases from other stores.     

What’s The Difference Between A Credit Memo And Debit Memo?

A debit memo, also called a debit note, is the opposite of a credit memo. A debit memo indicates an amount that you owe a business. You will likely need to pay off this debt the next time you make a purchase from them. It’s often issued to rectify a clerical error. For instance, when a merchant submits an invoice for an amount that’s lower than what the customer actually owes.

So, if you buy three goods or services from a business but they only charge you for two by mistake, they may send you a debit memo for the remaining debt you owe. You can then repay that undercharged amount directly or the next time you buy something.  

Banks may also issue debit memos on account holders’ statements for things like:

If you’re a customer and you receive debit memo charges, make sure to report them when filing your taxes. Even if your bank covers them, they are your responsibility.

Did You Recently Receive A Credit Memo In Canada?

Then there’s no need to panic. It just means that you have an unused balance with the business or entity that issued it to you, likely due to a return you made or an error on their part. Credit memos are common in Canada, especially among smaller businesses, so it’s important to understand what they are and what you should do when you get one.  

Credit Memo FAQs

Why did i get a credit memo on my bank statement?

There could be a few different situations where a credit memo appears on your bank statement but the most common occurs when you successfully return an item to a small or local business. You may also get a credit memo if a seller accidentally overcharges you. It’s basically a notification indicating that you have unused funds at that business.

What does “memo” stand for?

“Memo” is short for “memorandum”. In the case of bank accounts, this refers to a statement of a debt or positive balance following a two-sided business relation or specific transaction. It provides all the relevant details of that relation or transaction.

Are credit memos good or bad?

Neither. Credit memos are just a way for businesses and other entities to make sure they aren’t overcharging you. While a refund can be “better” because you can use the money anywhere. A credit memo means that you’re owed money by someone.

What happens when you get a credit memo?

It depends on the circumstances. Usually, a credit memo can reduce the price of an item that you purchased or eliminate its cost altogether. When a merchant issues a credit memo, it’s put toward the existing balance on your account to reduce the total.

Can I get a credit memo in Canada for a student loan?

Yes. Employment and Social Development Canada (ESDC) can issue you a credit memo if you’re a Canadian citizen and have fully paid a qualifying student loan. Keep in mind that you’ll have to apply for a credit memo through the ESDC in order to receive it.
Bryan Daly avatar on Loans Canada
Bryan Daly

Bryan is a graduate of Dawson College and Concordia University. He has been writing for Loans Canada for five years, covering all things related to personal finance, and aims to pursue the craft of professional writing for many years to come. In his spare time, he maintains a passion for editing, writing screenplays, staying fit, and travelling the world in search of the coolest sights our planet has to offer.

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